Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in HP Inc. (NYSE:HPQ)? The smart money sentiment can provide an answer to this question.
HP Inc. (NYSE:HPQ) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 59. HPQ investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 39 hedge funds in our database with HPQ holdings at the end of June. Our calculations also showed that HPQ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the key hedge fund action surrounding HP Inc. (NYSE:HPQ).
Do Hedge Funds Think HPQ Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 41 hedge funds with a bullish position in HPQ a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in HP Inc. (NYSE:HPQ), which was worth $511.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $166.5 million worth of shares. Laurion Capital Management, D E Shaw, and Alkeon Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to HP Inc. (NYSE:HPQ), around 1.46% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.14 percent of its 13F equity portfolio to HPQ.
Since HP Inc. (NYSE:HPQ) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds that slashed their positions entirely in the third quarter. At the top of the heap, Renaissance Technologies dumped the largest investment of the 750 funds watched by Insider Monkey, comprising close to $41.8 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dumped its stock, about $16.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to HP Inc. (NYSE:HPQ). We will take a look at Williams Companies, Inc. (NYSE:WMB), West Pharmaceutical Services Inc. (NYSE:WST), Liberty Broadband Corp (NASDAQ:LBRDK), LyondellBasell Industries NV (NYSE:LYB), Brown-Forman Corporation (NYSE:BF), MongoDB, Inc. (NASDAQ:MDB), and Corning Incorporated (NYSE:GLW). This group of stocks’ market caps are similar to HPQ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMB | 40 | 658659 | 1 |
| WST | 29 | 794549 | -2 |
| LBRDK | 63 | 7101088 | 0 |
| LYB | 39 | 676597 | -2 |
| BF | 31 | 1656640 | 0 |
| MDB | 47 | 2171957 | 3 |
| GLW | 40 | 408052 | -2 |
| Average | 41.3 | 1923935 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $1924 million. That figure was $1044 million in HPQ’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand West Pharmaceutical Services Inc. (NYSE:WST) is the least popular one with only 29 bullish hedge fund positions. HP Inc. (NYSE:HPQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HPQ is 24.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on HPQ as the stock returned 28.9% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
